A freemium service can already be built with a payment escrow for anti fraud protection, for willing merchants and customers. Fighting fraud is useful for banks to invest regardless of whether it's UPI or not, I'm not sure if you need separate models for UPI. Request abuse is pretty easy to track i imagine, for any bank or even for npci...and npci has a big profit pool.

Indeed internet shutdowns are a problem but i think the state will have to move out of shutdowns as UPI gets popular. You are right, that is a pain.